238-Unit Property Trades for $47K Per Unit

TIGARD, OR-LNR Property Corp. has sold a 238-unit apartment complex here for $11.2 million, according to public records. The new owner is a San Marino-based private investor who was in a 1031 Exchange.Sunflower Apartments is located at 11547 SW 135th Ave. in this city southwest of Portland in Washington County. LNR developed the asset in 1998 using Low-Income Housing Tax Credit financing. The LIHTC restrictions on the property expired in December. The restrictions required that the units be rented at 60% of median income and that tenants not pay more than 30% of their income toward rent. Robert Sheppard and Armand Tiberio (the Sheppard Group) with Marcus & Millichap in Seattle had the disposition assignment. Barry Gordon in Marcus & Millichap’s Los Angeles office secured and represented the buyer in the transaction. Sheppard declined to confirm the identity of the buyer, which property records list as LNR Sunflower Ltd. Inc., but did say the expiring restrictions should help raise occupancy at the property, thereby rzising the capitalization rate for the buyer. “The biggest hurdle wasn’t rents; those have been restricted by the market,” says Sheppard. “The hurdle was the small rental pool created by the restrictions. We see it all over the country, where you have a property operating at 88% occupancy and as soon as it comes out from under the restrictions occupancy moves to 94-95% because you have more tenant options.”The property is currently 91% occupied. Assuming a modest increase in occupancy, Sheppard says the capitalization rate on the investment is about 6%, based on current market rents. The buyer is betting the cap rate will continue to rise as the Portland-area apartment market recovers and rents can be increased.Sheppard describes the asset as a “well-maintained C+ class property” that, given its location near the region’s technology corridor, “is positioned to reap the benefits of job growth, population growth, and ensuing rent growth when the high-tech market recovers in the next two to three years.